janw@inmet.UUCP (01/02/86)
[ Karl Dahlke ihnp4!ihnet!eklhad] [an extremely lucid and informative piece on natural monopolies in roads and communications by Karl Dahlke] Some statements, however, are made or implied but not substantiated. >Some have demanded a controlled experiment, but I could not accept >the costs and risks associated with such an experiment, Why do you think there are any costs - and costs to whom ? The experiment would consist in *changing the rules* over a certain area (like a state) - obviously on a voluntary basis. The im- mediate result would be *gain* - less taxes - to the local ci- tizens; and *no loss* to the government (it would save on road building). The long term result would be loss (bad roads) - or gain to the state, depending on success or failure.. Thus, there is a *risk*, but also a chance of gain, i.e. a *gamble*, but a voluntary one (well, at least on the part of local *majority*). >while there are no theoretical arguments favoring private control of roads. There are *some*. First, government intervention *in itself* is a social evil, ir- respective of economic results. Thus, even somewhat *inferior* economic performance might not be too great a cost to get rid of the Big Brother. Second, it usually costs the government twice as much to do any- thing. Why doesn't that include road building and maintenance ? Then again, toll roads can be exploited more rationally - e.g. lower toll off peak hours, thus encouraging better traffic condi- tions. A private company - even a monopoly - would have a market incentive to find such cost-saving solutions. >Why should this monopoly be handled privately while others are not? ^^^^^^^^^^^^^^^^^^^^ This begs the question: why shouldn't *all* natural monopolies be private and *unregulated* ? In your own excellent expose, you described how a phone company would keep its monopolistic position - through *low rates*. Well, let it ! Finally, in a surge of intellectual honesty, let me throw in an argument for the other side: historically, good road systems do correlate with centralized governments. (E.g., Roman and Inca Em- pires). European feudalism, though highly progressive economical- ly, had a dismal record on roads. (On bridges, not bad at all). The reasons, however, seem obvious: such road systems helped maintain centralized control and were built by those who wanted such control, opposed by those who didn't. These reasons are hardly valid now. Jan Wasilewsky
sykora@csd2.UUCP (Michael Sykora) (01/02/86)
>/* eklhad@ihnet.UUCP (K. A. Dahlke) / 12:32 pm Dec 30, 1985 */ >Like roads, telephony possesses economic characteristics that make >competition impractical and inefficient, at the local level. New technologies seem to be challenging this notion. Many firms are bypassing the local telephone company when hooking up to a long-distance carrier, for example. >An interesting difference between roads and telephony is the >solution adopted. The government was always a bit afraid of >telephony, since it is a high tech thing, and (sometimes) >the government recognizes its own technical incompetence. How do you know that this was the reason? >For now, can we dispense with the "private roads would work" articles? No. Mike Sykora
kort@hounx.UUCP (B.KORT) (01/12/86)
A further argument in favor of single-server industries (e.g. monopolies) is economy of scale. In the telephone industry, as in the airline industry, the unit cost per message-mile or passenger-mile goes down with the volume of traffic. Competing companies have trouble serving small-town America, because unit costs are high in sparsely populated areas. Airline dereglation drove fares down between big cities, but smaller communities are now much more expensive to fly to. About a hundred years ago, the British Post Office charged according to weight*distance. Then a Minister of Posts introduced a flat rate independent of distance. People were then able to affix stamps to their mail, and fewer postal clerks were needed. The average cost of sending a letter dropped. The system worked because the Post Office was a monopoly. If competition were permitted, the competitor would elect to serve only the short-distance inner city mail, at a cost below the nationwide average. Similar logic applies to competition in the telephone industry. --Barry Kort